Pound Holds Two-Day Gain Before BOE’s Haldane Speech, GDP Data

• Pound Holds Two-Day Gain Before BOE’s Haldane Speech, GDP Data

The pound held a two-day gain versus the dollar as investors waited to see if Bank of England Chief Economist Andy Haldane will maintain his hawkish view in a speech due later Tuesday.

BOE policy makers voted 5-3 last month to maintain interest rates at a record-low 0.25 percent and Haldane has indicated that he may start voting for a rate increase soon. His speech will be one of the last clues about potential rate hikes before the Monetary Policy Committee’s next announcement, due Aug. 3. Investors will get their latest insight into the U.K.’s economic outlook on Wednesday when the Office for National Statistics releases its second-quarter growth data.

Government bonds were little changed before the Debt Management Office auctions 2.5 billion pounds ($3.3 billion) of gilts due in July 2047.

• GBP/USD little changed at 1.3030 as of 10:04 a.m. in London, after climbing 0.4% in previous two days
  • “Cable should be trading toward $1.35 most definitely within six months horizon,” said Petr Krpata, Chief of EMEA FX Strategy at ING Bank. “From a valuation point of view, downside is limited and we have a bullish view on euro-dollar”
• U.K. economy grew 0.3% in 2Q, according to median forecast of analysts in Bloomberg survey; up from 0.2% in the first three months of 2017
• U.K. 2047 gilt sale equivalent to around 50k gilt futures
  • Negative supply this quarter, Monday’s coupons and index extensions should all support this sale, writes Santander strategist Adam Dent in a note; recommends 10s30s flatteners given the favorable supply environment
• GBP3.17b in coupon payments were being returned to investors on Monday, majority of these coupon payments (~GBP2b) are skewed to the 15y+ sector
• Benchmark 10-year gilt yields steady at 1.19%